Financial Supervisory Service Inspects Lenders for Illegal Debt Collection

South Korea’s Financial Supervisory Service has launched targeted inspections of lenders following a rise in consumer complaints about aggressive or unlawful debt collection activity. The review focuses on banks, nonbank lenders, and online finance platforms, with regulators citing a pattern of alleged threats, excessive contact attempts, and violations of borrower‑protection rules.

The agency said it initiated the inspections after noting a measurable increase in harassment allegations tied to delinquency surges among personal loan borrowers. Enforcement teams are examining call logs, scripts, complaint files, and vendor‑management controls to assess whether institutions are complying with limits on communication frequency, proper identity disclosure, and restrictions on third‑party contact.

Early observations suggest some lenders may have used automated outreach systems in ways that exceed permitted contact caps or failed to verify vendor compliance with collection‑conduct rules. Regulators are also reviewing whether companies adequately documented borrower hardship claims and offered mandated relief options before escalating collection efforts.

The Financial Supervisory Service indicated that penalties could include administrative fines, mandated remediation plans, or suspension of certain collection activities. It also signaled plans to issue updated supervisory guidance later this year, particularly for digital lenders and platforms that rely heavily on outsourced or automated collection functions.

For the global credit and collections industry, the inspections underscore a broader regulatory trend: supervisors are increasingly scrutinizing contact frequency, third‑party outreach, and the governance of automated systems. Lenders operating in multiple jurisdictions may face tighter expectations around audit trails, real‑time monitoring of collection vendors, and documentation of borrower‑assistance workflows.